The end of the tax year has passed and a new tax year is upon us, which means you have a new Capital Gains Tax (CGT) allowance for 2013/14 which can be used to minimise any tax you pay on the sale of investments.
The CGT allowance for 2013/14 is £10,900 per person which means you can make gains on investments e.g. Unit Trusts and shares held outside of an ISA or Pension, up to this amount without worrying about paying tax.
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Markets have risen steadily since the beginning of December 2011 leaving a lot of investments with gains that just were not there a few months ago. That provides you with the perfect opportunity to take advantage of this generous allowance.
However, you do need to be careful about how you take advantage of it exactly. Simply selling the investments is fine if you were thinking of doing it anyway, though you do need to have in mind what you will do with the cash.
If you were not thinking of selling but fancy cashing in the gains and reinvesting then there are a couple of options. You could either ‘Bed and ISA’ the investment. This is where the investment is effectively sold and repurchased within an ISA. You will spend minimal time out of the market, move the investment within an ISA for future tax efficient investing, and create a gain (or loss) by doing this. Of course you need to be wary of the ISA contribution rules before you do this. That is, make sure you have not already used up your ISA allowance.
If you have then the old ‘Bed and Breakfast’ opportunity where you sell and repurchase the same asset no longer exists. HMRC rules state that you cannot purchase the asset sold for a minimum 30 days. That makes things a little tricky. What you can do in that situation is sell your investment and buy back a very similar investment to either act as a proxy for the short term, or simply to buy into and hold as an alternative to what you had. Or, you could buy back the same investment but in your partner’s name.
Please remember that none of the above is a personal recommendation. If you do need independent financial planning advice please contact us using the details above.